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COMPANY OF THE DAY : APPLE

Apple reported earnings that beat most estimates, driven by better than expected iPhone sales of nearly 44 million units, a year-over-year increase of around 17%. The company also announced a 7-for-1 stock split and a $30 billion addition to its share buyback plan. In our earnings note we discuss these earnings and our outlook for the rest of the year.

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FORECAST OF THE DAY : COMCAST'S NBCUNIVERSAL THEME PARK REVENUES

Comcast's Universal Studios Hollywood will host a new attraction based on its popular Fast and Furious film series. The theme park announced plans to add a 3-D, HD feature to the park's Studio Tour tram ride by summer 2015. While theme parks are just a small part of Comcastâ s business, they help promote other NBCUniversal properties and bring in stable cash flows. We expect theme park revenues to exceed $3 billion by the end of the decade.

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Comcast Adds Pay-TV Subscribers For The Second Consecutive Quarter; Q1 Results Impressive With Strong Growth Across The Segments
  • by , 12 hours ago
  • tags: CMCSA NFLX AMZN TWC DISH DTV
  • Comcast (NASDAQ:CMCSA) recently posted its earnings for the first quarter with strong gains across the segments. NBCUniversal saw a fantastic quarter reflecting benefits from the Winter Olympics, which generated $1.1 billion in revenues. The cable giant added 24,000 pay-TV subscribers during the quarter as compared to loss of 25,000 subscribers in the prior year quarter. This is the second consecutive quarter of gains for Comcast after 26 quarters of video subscriber losses. It must be noted that Comcast has changed the method to measure the subscriber additions from an equivalent billing units (EBU) approach to billable customers method. If we consider the EBU approach, which was followed till last quarter, the company added 4,000 video subscribers as compared to a loss of 60,000 in the prior year quarter. The company continued to benefit from triple play bundling and posted 14% jump in overall revenues and 16% gain in operating income. Earnings per share rose by 32% to $0.71. On the cost front, programming expenses increased 9% driven by increases in retransmission consent fees, higher sports programming costs, and step-ups for recently completed long-term agreements. Overall, the mammoth posted solid results with balanced growth across the segments. We currently have $56 price estimate for Comcast, which we will soon update based on the first quarter earnings announcement.  
    KMB Logo
    Riding On International Growth, Kimberly-Clark Posts Another Set Of Strong Quarterly Numbers
  • by , 13 hours ago
  • tags: KMB PG CL UL
  • Kimberly-Clark (NYSE:KMB), the manufacturer of the widely popular Huggies diapers, registered a 4% year-on-year increase in first quarter organic sales (excludes the impact of changes in foreign currency exchange rates and lost sales as a result of restructuring activities). All the segments posted organic sales growth of 3% or more, except health care where sales increased only by 1% due to decelerating growth in the U.S. —the largest market for disposable medical devices in the world. Kimberly-Clark is pursuing a spin-off of the health care division (expected to complete by the end of this year) due to its lower than company-average organic sales growth and operating profit growth. It has assembled the leadership team for the new entity ahead of the spin-off. Despite the healthy growth in organic sales, Kimberly-Clark’s net revenue fell by approximately 1% compared to the year-ago period to $5.3 billion. This was due to the negative impact of currency translation losses and lost sales as a result of restructuring activities that reduced net revenue by 3% and 2%, respectively. However, operating profit increased 2% to $797 million as $80 million in cost savings from the company’s FORCE (Focused On Reducing Costs Everywhere) program and pulp and tissue restructuring actions more than offset the decline in revenue. We are in the process of updating  our $112 price estimate for Kimberly-Clark’s stock based on the recently announced results. K-C International Will Continue To Lead From The Front Like previous quarters, Kimberly-Clark’s international segment led the growth in Q1 with a 12% increase in organic sales. The segment registered high single-digit to double-digit organic sales growth in categories such as adult care, baby diapers and feminine care. Growth was particularly strong in diapers, as indicated by diaper organic sales, which increased 30% in China, 25% in Russia and 15% in Brazil. This robust growth is attributable to the company’s expansion into newer cities in these countries and the launch of new products and innovation. The penetration of baby care products is increasing at a fast rate in countries such as Brazil and China owing to a large population, an increase in purchasing power, persistent product innovation and greater brand awareness among consumers. Kimberly-Clark has increased its focus on these markets following its exit from the saturated Western and Central European diaper market in Q2 2013. The company has identified China as a key growth market and will expand into more Chinese cities by the end of the year. It will launch new diaper innovations in Brazil, China and Russia, and also support these by increasing its advertising spend. We think that these factors put the company on track to deliver strong growth in international baby care this year. Kimberly-Clark’s international portfolio is more inclined towards diapers and feminine care. Its diapers and feminine care products have greater reach in international markets than its baby wipes and adult care products. This offers it the opportunity to expand its presence in the latter two categories as well. Operating Margins Will Expand Due To Cost Savings And Downsizing Actions The FORCE program is aimed at containing costs and keeping the company on track for sustainable growth. FORCE delivered $310 million in cost savings in 2013, and another $70 million in Q1 2014, allowing Kimberly-Clark to absorb currency translation losses and commodity cost inflation. The company expects significant currency headwinds and higher commodity costs this year. However, it also expects to save at least $300 million from the FORCE program which should help it sail past these headwinds and post margin expansion. We think that Kimberly-Clark’s recent efforts to enhance the selling price per unit for tissues and diapers will also provide an upward momentum to the margins. In mid-2013, the company carried out a de-sheeting exercise across its Kleenex and Cottonelle line of tissue products, reducing the number of tissues per box by 13% without changing the price of the box. The effective rise in price per sheet boosted operating profits for consumer tissue (accounts for 31% of company net sales) by 17% year-on-year in Q4 2013, the highest for any business segment of the company. Kimberly-Clark conducted a similar exercise across its Huggies diapers range and began shipping the new packages in February. We believe this will help the company to post margin expansion in baby care as well. Baby care products contribute about 25% to company net sales. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    NFLX Logo
    Netflix Continues To Benefit From Content Superiority
  • by , 13 hours ago
  • tags: NFLX AMZN CMCSA
  • Netflix ‘s (NASDAQ:NFLX) stock jumped by 7% in after-hours trading following its Q1 2014 earnings announcement. The growth in the number of subscribers in both the U.S. and international markets was impressive. This was primarily driven by reduced subscriber churn and popularity of its original content. Netflix intends to double its investment in original TV series this year, but the spending will still remain less than 10% of its overall content expenses. Subscriber growth led to improved domestic margins and a reduction of losses in international operations. We expect this trend to continue although the rate of margin improvement is likely to come down. The company also announced that it may consider increasing prices for new customers by $1 to $2 in the latter half of 2014. We believe that the immediate impact of this price increase will be minimal and any additional profits will be directed towards funding overseas expansion. Here is what you need to know about Netflix’s earnings. Our $271 price estimate stands at a discount of about 25% to the market.
    LVS Logo
    Q1 Earnings Preview: Las Vegas Sands Will Ride High Over Mass Market Gaming Growth In Macau
  • by , 13 hours ago
  • tags: LVS MGM WYNN
  • Las Vegas Sands (NYSE:LVS) will report its Q1 2014 earnings on April 24. We expect the casino giant to benefit from continued strength in Macau gaming, which continued its impressive run into 2014 as visitors flocked to Asia’s gambling hub. More than 770,000 mainland Chinese visitors traveled to Macau during the New Year holidays from Jan. 31 to Feb. 6, reflecting an increase of 23% from a year earlier, according to the Macau Government Tourist Office. Macau witnessed 20% jump in gross gaming revenues during the first quarter of 2014 as compared to the prior year quarter. We expect Las Vegas Sands to post solid results in the first quarter on the back of continued growth in mass-market gaming, which accounted for 28% of Macau’s gross gaming revenues in the first quarter. Moreover, the VIP gaming market also grew by 13% during the same period. We are eager to see how the company’s Singapore operations pan out given the economy grew by 5.1% over the prior year quarter. See our complete analysis for Las Vegas Sands Las Vegas Sands Will Benefit From Mass-Market Gaming Growth In Macau Macau’s casino market continued its impressive run into 2014 and collected more than $12 billion in gaming revenues during the first quarter, up 20% from Q1 2013. While the VIP segment grew by 12.5%, the mass-market gaming surged 39% as compared to the prior year period. Las Vegas Sands will benefit from its diverse properties in the region primarily Cotai, which has been growing rapidly and has captured some of the mass-market and VIP gaming share of the peninsula. While there are many new properties that are being developed in Cotai, only three are currently operational. Las Vegas Sands operates the largest resort in the region. We expect solid growth in the Las Vegas Sands’ mass-market gaming primarily driven by its Cotai property (Also Read – Why Is The Cotai Vision A Boon For Las Vegas Sands? ) We continue to believe that Macau operations will drive growth for Las Vegas Sands in the coming years. The company’s Cotai property, Sands Cotai Central (SCC) appears to have a potential of much more than $1 billion in annual EBITDA. With more than 200 mass market tables to offer, SCC in Cotai, is becoming a hot property in Macau and the arrival of The Parisian in 2015 will add to its offerings in the region. Singapore’s Economy Expands Weakly Las Vegas Sands’ business operations consist of leisure and entertainment activities, and can be linked to the state of the economy, tourism and consumer spending. According to an advance estimate released by the Ministry of Trade and Industry, Singapore, Q1 2014 GDP expanded at a seasonally adjusted annualized rate of 0.1% over Q4 2013. While the growth was well below the 6% expansion witnessed in the previous quarter, GDP expanded 5.1% over the same period of last year in Q1. The Monetary Authority of Singapore expects GDP to grow between 2.5% and 3.5% in 2014. There are many tourists who come to Singapore from other South-East Asian countries for gaming activities. While the data for visitors in the first quarter is not available, the Singapore Tourism Board forecasts the visitors to increase by 8% in 2014. Singapore is the second biggest market for Las Vegas Sands after Macau, and constitutes roughly 18% of the company’s value, according to our estimates. During Q4 2013, the company saw 8% decline in revenues and 14% decline in EBITDA primarily due to lower rolling chip volume. However, the hotel business continued to be fruitful for the company with occupancy levels of 97% and RevPAR (revenue per available room) of $411 as compared to $362 in the prior year period. It will be interesting to see how the first quarter pans out in the region for Las Vegas Sands. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    TWC Logo
    Time Warner Cable Q1 Earnings Preview: Pay-TV And Broadband Subscriber Trends In Focus
  • by , 13 hours ago
  • tags: TWC CMCSA DISH DTV NFLX AMZN
  • Time Warner Cable (NYSE:TWC) will report its Q1 2014 earnings on April 24 and we will be closely watching for any update on the proposed merger with Comcast (NASDAQ:CMCSA). We believe that the company will see continued growth in broadband business as the residential and business demand for high-speed data services continues to grow on the back of increased use of multiple devices and higher penetration of smartphones. We are eager to see how the company’s pay-TV subscribers are trending given that Comcast managed to add 24,000 video customers during the first quarter. Time Warner Cable has been losing video subscribers for several quarters amid increasing competition from telcos, alternative video platforms, and the frequent blackout of various networks in many of its serviced areas. See our complete analysis for Time Warner Cable Broadband Will Stay Firm The broadband business has done well for Time Warner Cable, benefiting from rising demand for faster Internet and a decline of DSL Internet connections. From 7.9 million subscribers in 2007, Time Warner Cable’s broadband base increased to 11.61 million in 2013. The broadband business generated revenues of $6.9 billion in 2013, 15% higher compared to 2012. We expect broadband revenue will continue to increase as the U.S. broadband market is growing rapidly, driven by an improving economy and growing need for higher speed connectivity. The increased use of multiple devices and higher penetration of smartphones is also aiding broadband demand. According to a report by Akamai (NASDAQ:AKAM), the U.S. ranks 18th overall in broadband penetration worldwide. The U.S. had 75% of the population on broadband connections. Given that only 75% of Americans use broadband, there is still much room left for broadband to penetrate, and this will benefit the cable industry in particular as it accounts for 59% of the U.S. broadband market and Time Warner Cable commands 14% share of the industry.   Watchout For Pay-TV Subscriber Trends The pay-TV business contributes around 45% to Time Warner Cable’s value, according to our estimates. For cable companies in the U.S., the past several quarters have been tough, as they experienced significant challenges in retaining their pay-TV subscribers. This difficulty reflects a combination of market saturation, fierce competition, and the increased focus of providers on acquiring higher-value subscribers. Moreover, some consumers opt for a lower-cost mixture of over-the-air TV, Netflix (NASDAQ:NFLX) and other over-the-top viewing options.  By the end of 2013, Time Warner Cable’s video subscribers fell to 11.4 million, down 825,000 from 2012. Last year, the company stated that it will pursue subscribers with higher ARPU (average monthly revenue per subscriber), higher profit and lower churn, even if that means fewer connects. However, it has so far not been able to tame the subscriber losses. On the other hand, Comcast reported modest gains in pay-TV subscribers for two consecutive quarters. After losing thousands of pay-TV subscribers, Time Warner Cable has now been re-branding itself as a pure broadband player.
    NYT Logo
    The New York Times Earnings Preview: What We are Watching
  • by , 13 hours ago
  • tags: NYT GOOG AOL GCI YHOO
  • The New York Times Company (NYSE:NYT), one of the leading newspapers in the U.S., is set to report its first quarter earnings Thursday, April 24. The secular decline in print advertising has pushed New York Times to move away from its core competencies as a print publisher, and offer a comprehensive suite of digital content which includes both video and digital print offering. Therefore, in this earnings announcement the focus will be on the growth in New York Times’ digital subscriber base, which is expected to drive revenue growth in the future. However, with the sale of New England Media Group (NEMG) complete, we expect the company to report a marked improvement in its revenue growth and profit margins, and will closely monitor these in this earnings announcement. Click here to see our complete analysis of New York Times Margins And Revenue Growth In Focus NYT has been able to maintain its market share in the print industry, and its circulation revenue has grown on the back of increases in subscription price and distribution through the internet. Furthermore, with the sale of New England Media group complete, company’s operations are unencumbered by a division that had very low margins. We anticipate that NYT’s margins and revenue growth should significantly improve in Q1. Digital Subscription Expected To Grow According to our estimates, the NYT’s print circulation and digital subscription division contributes over 45% to its stock value. While the NYT’s daily print circulation continues to decline, its digital subscriber base is gaining traction. In 2013, NYT’s digital subscriber base grew by 14% year over year. The company continues to add content, especially video content, to its properties in an effort to attract more users. Additionally, the NYT continues to leverage its brand popularity to expand abroad and rope in new digital subscribers. We expect the NYT to show further improvement in online subscriptions in the quarter, and we will continue to watch this metric closely during this earnings announcement. Print Advertising Revenues To Decline Print ads is the second largest division of NYT and makes up for nearly 28% of its value by our estimates. With the advent of the Internet, the print ads business has been on a decline since most advertisers have increased spending on online ads. This division has not been able to buck the trend and continues to report a decline in revenue. We expect the trend to persist this quarter too. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    CHL Logo
    China Mobile's First Quarter Profit Falls 9% On Rising Competition, Subsidies
  • by , 13 hours ago
  • tags: CHL CHA CHU
  • China Mobile (NYSE:CHL), the world’s largest wireless carrier, reported a mixed set of results in its first quarter earnings release on April 22. The carrier’s net profit declined 9.4% year-over-year (y-o-y) to RMB 25.24 billion (~$4 billion) even as its operating revenue grew about 8% to RMB 154.8 billion (~$25 billion). This decline in net profit can be attributed to increasing competition in the Chinese wireless market and the growing popularity of over-the-top (OTT) applications. OTT applications such as WeChat allow users to share text/picture/video messages over their phone’s Internet connection, and their increased usage resulted in a massive drop in revenues from traditional messaging services (SMS & MMS) for the carrier. Overall SMS usage on the carrier’s network declined from about 164 billion messages in Q4 2013 to 153 billion in Q1 2014. While growing subsidy costs put a dent in China Mobile’s profits, it helped the carrier grow its 3G/4G subscriber base by almost 20% sequentially in Q1 2014 to about 228 million. Considering that data traffic is quickly becoming the primary avenue for future revenue growth, the carrier vigorously expanded and promoted its high speed 4G network, gaining 2.8 million 4G subscribers in the quarter. The average mobile data usage per subscriber grew by about 84% to 70 MB per month. Going forward, we expect China Mobile to continue gaining 3G/4G subscribers faster than its rivals owing to its larger 4G network and its ability to offer higher handset subsidies. However, higher costs and increasing competition from rival wireless carriers  China Unicom (NYSE:CHU) and  China Telecom (NYSE:CHA), as well as OTT applications such as WeChat, might continue to weigh on profitability in the near term. We currently have a  price estimate of $53 for China Mobile, implying a premium of about 15% to the current market price.
    MSFT Logo
    Microsoft Earnings Preview: Satya Nadella’s ‘Mobile First, Cloud First’ Strategy In Focus
  • by , 14 hours ago
  • tags: MSFT YHOO GOOG AOL IBM CRM
  • Microsoft (NASDAQ:MSFT) is set to announce its Q3 FY 2014 earnings on Thursday, April 24. During the quarter, the company named Satya Nadella, former head of the cloud and enterprise division, as its new CEO. Over the course of last two months, Mr Nadella has re-stated Microsoft’s commitment to developing a comprehensive suite of software that extensively uses cloud technology, and is easily deployable on mobile devices. Additionally, the company continues focus on the sale of smart connected devices such as tablets and smartphones to bolster its revenues, and improve its market share in mobile devices vertical. It is also focusing on its Virtualization and Cloud platforms, respectively called Hyper-V and Azure, to leverage the fastest growing segments of its enterprise markets,  In this earnings announcement, we will continue to closely monitor the revenue growth from these initiatives i.e mobile devices, cloud and operating system. See our complete analysis of Microsoft here Focus on Hardware Sales The global PC shipment is still reeling from decline in demand. However, the severity of the decline eased significantly compared with the past seven quarters. According to Gartner, the global PC shipments market shrank by just 1.7% in Q1 2014. Key here is Microsoft’s termination of support for Windows XP, which is forcing laggards to upgrade from this populat OS. Microsoft is increasingly pursuing its devices and services strategy to reduce its reliance on PCs, and expand its footprint into the mobile hardware domains. In this earnings announcement, we are closely monitoring Microsoft’s unit sales and revenue numbers for its devices and consumer hardware segment. This would give us a fair indication of how these devices have fared, and whether its devices are gaining traction amongst users. Cloud Products And Services To Drive Revenue Growth Microsoft is steadily making progress in the cloud domain. Its Office 365 offering continues to bolster revenues for Windows Office division, which makes up 40% of our estimated value. On the other hand, strong adoption of cloud based Azure platform continues to drive growth at server division, which makes up 24% of our estimated value. The company continues to support adoption of its cloud services through a host of initiatives such as free Office 365 access to students and  new server and cloud enrollment offers . We believe that these steps will augur well for the company, and expect it to report growth in revenue run rate from cloud products and services. We anticipate that Office 365 will clock in over $1.7 billion annual revenue run rate as its clients adopt the feature-rich, cloud-based Office software. Additionally, we expect strong adoption of Azure platform will continue to bolster the commercial licensing revenues, which maps onto our server division vertical. Windows 8.1 License Sales In Focus Windows Operating System (OS) is Microsoft’s third largest division and makes up around 10% of its stock value according to our estimates. This division continues to report decline in revenues due to decline in global PC shipments. However, the company has taken a host of steps to bolster license sales of Windows 8.1. During the quarter, Microsoft is said to have slashed the price of Windows 8.1 by 70% for pre-installation on devices costing less than $250.  (( Microsoft Said to Cut Windows Price 70% to Counter Rivals, February 22 2014, www.bloomberg.com) ) Note that such devices are precluded from receiving marketing support dollars amounting to roughly the first 20% of the discount.  Furthermore, as we noted above, the company phased out support for Windows XP in April. We expect that these efforts will bear fruit and license sales to pick up gradually. In sum, new PC shipments, together with the existing installed base of Windows PC’s,  should help Microsoft to post growth in license sales during the quarter. Therefore, in this earnings announcement, we will continue to pay close attention to the numbers of licenses of Windows sold in both the desktop and mobile vertical. We have  $41.21 price estimate for Microsoft, which is inline with its current market price. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    DNKN Logo
    Dunkin' Brand Earnings Preview : Sales and Margins To Grow
  • by , 14 hours ago
  • tags: DNKN CMG MCD SBUX
  • Dunkin’ Brands (NASDAQ: DNKN) is scheduled to announce its Q1 earnings on April 24. The company runs both the Dunkin Donuts and Baskin-Robbins chains. 2013 was a successful year for the company, which saw an 8.5% increase in annual revenues. Comparable sales also grew 3.4% last year.Comparable sales, or same-store sales, is an important measure to gauge a restaurant’s performance since it only includes the restaurants open for more than a year and excludes the effect of currency fluctuation. For 2014, Dunkin’ is targeting a comparable sales growth of 3%-4% for Dunkin’ Donuts and 1%-2% for Baskin-Robbins, with a 6%-8% growth in revenues. We expect increasing sales and rising margins this quarter, in line with the company’s guidance for the year. We have a $49 price estimate for Dunkin’ Brands, which is in line with the current market price. According to our analysis, Dunkin’ Donuts stores operating in the U.S. contribute about 80% to the company’s valuation. See full analysis for Dunkin’ Brands Comparable Sales Ascending The comparable sales of Dunkin’ Donuts stores in the U.S. rose by 3.5% in Q4 2013. The growth was primarily driven by increased average ticket and increased customer traffic. The introduction of new items in the menu such as breakfast sandwiches and wraps has been able to draw in more customers, especially during the afternoon segment. The company had shifted their focus on the afternoon segment after it grossed only 40% of its total sales after 11 am in 2013. Dunkin’ Donuts is also working on reaching out to customers through social media and connecting with them on an individual level. Apart from building its fan community on Facebook, it is also developing its loyalty program through Dunkin’ Donuts cards and a mobile app to enhance customer experience . Although the loyalty program is not expected  to immediately boost sales in the short run, the company expects the program to help strengthen its customer base by offering custom-designed offers to them in the future. Digital marketing and one-to-one connectivity with the millenials is working well for major food chains, and can prove to be a game-changer for Dunkin’ too. Baskin-Robbins International stores, the second major segment of the company, recorded 1.6% rise in comparable sales in Q4 last year. Strong sales were mainly reported from Korea, Middle East, Australia and Columbia. The company had introduced cakes, low-fat ice-creams and new flavors of ice-creams in order to attract more traffic. Such introductions in the menu are expected to continue pulling up sales this year as well. Operating Margins To Swell As Dunkin’ Donuts and Baskin-Robbins are both 100% franchised brands, Dunkin’ Brand accrues high margins. In Q4 2013, Dunkin’ Donuts stores in U.S.  reported 76.1% operating margins. Since all the stores are owned by franchisees, the company does not have to incur running costs such as labor, occupancy or raw material costs. If the sales continue to swell, Dunkin’ would be able to record healthier operating margins. An issue of concern for the company is food price inflation. Although it does not affect Dunkin’ directly, but the price rise may force the franchisees to hike the menu prices which in turn could affect the net sales. As Dunkin’ charges a percentage of sales revenue from franchisees as royalty and franchise fee, it could see a dip in its margins due to a decline in sales. Expansion Drive To Continue Dunkin’ Brands added 790 new restaurants worldwide in 2013, including 371 outlets of Dunkin’ Donuts in the U.S. This year, it plans on opening 685-800 new outlets, including 380-410 new restaurants of the Dunkin’ Donuts chain in the U.S.
    BHI Logo
    Baker Hughes' Aker Solutions Alliance Highlights The Importance Of Subsea Technologies
  • by , 14 hours ago
  • tags: BHI HAL SLB
  • Baker Hughes (NYSE:BHI), one of the world’s largest oilfield services companies, announced that it will form an alliance with Norway’s Aker Solutions to develop technologies that will reduce costs and increase the production and recovery rates for subsea wells. The deal comes at a time when oil and gas majors are looking at ways to maximize reservoir productivity and cut costs, after years of heavy capital spending. The two companies did not disclose the financial terms of this non-incorporated alliance, which would allow them to work on joint solutions and possibly bid for projects jointly. We believe that the deal makes sense for Baker Hughes, since it would allow it to offer subsea customers more integrated solutions that combine its strength in well completions and artificial-lift technology with Aker Solutions’ expertise in subsea production and processing systems.
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